First, there was Nio (NYSE:NIO). Now, the hype surrounding Chinese electric-vehicle (EV) start-ups is extending to that company’s rival, Xpeng (NYSE:XPEV). Apparently, the same rocket fuel that powered its competitor is now also boosting XPEV stock.
Right now, Xpeng’s sales figures are quite impressive. The problem is, though, that it’s entirely possible the company’s future growth has already been fully priced into the shares.
To borrow an apt phrase from InvestorPlace contributor Thomas Niel, it’s not a bad idea to “wait for shares to sell off before buying ‘too hot to touch’ XPEV stock.” Niel says that this name is currently in bubble mode. I agree — investors should proceed with caution.
With that in mind, a prudent approach is to wait for the price to pull back before you start accumulating XPEV. However, you should only do this if you believe in the company’s growth story. Fortunately for would-be investors, there’s a solid argument that this electric car upstart still has juice in its battery.
A Closer Look at XPEV Stock
With interest in EV stocks going through the roof in 2020, perhaps it shouldn’t be too surprising that Xpeng’s initial public offering (IPO) was a blockbuster success.
Still, the numbers are pretty amazing. Believe it or not, Xpeng sold 100 million American depository receipts (ADR) for $15 apiece. That means the company raised $1.5 billion.
Additionally — as you might’ve expected — amateur retail traders had little chance of getting shares at the original IPO price. Upon its Aug. 27 debut, XPEV promptly breached the $21 level. And the share price didn’t stray too far from that level during the next couple of months. However, November has proven to be the real breakout period for the stock.
On Nov. 24, XPEV stock reached a stunning 52-week high of 74.49. So, now anyone who patiently held shares through September and October must ask themselves a crucial question — is it time to take profits or hold on for more upside?
Personally, I would consider taking at least partial profits on XPEV stock as it’s gone absolutely parabolic in November. The potential for a sharp retracement is present as institutional investors might sell off large chunks of their holdings.
For the same reason — if you don’t have a position in XPEV yet — you might want to wait for a pullback in the price before jumping in. Keep in mind that stocks don’t just go straight up. There are bound to be dips, even in a strong uptrend.
All that said, I certainly wouldn’t advise that traders attempt to short-sell this name. Betting against Xpeng now would be a rash decision — the company’s sales numbers are on a powerful upward trajectory.
Breaking Down the Numbers
If you need proof that XPEV stock’s growth narrative is fully intact, just take a look at the company’s recent vehicle delivery results.
For the month of October, the EV maker delivered 3,040 vehicles. This represents a whopping 229% increase on a year-over-year (YOY) basis. Moreover, the company delivered 17,117 vehicles year-to-date (YTD) as of Oct. 31. That signifies a 64% YOY improvement.
Xpeng’s third-quarter unaudited financial results also provide a snapshot of a serious mover in the Chinese EV market. For that quarter, the company delivered over 8,500 vehicles. This represents a nearly 266% increase compared to Q3 of 2019, as well as a nearly 166% improvement over Q2 of this year.
So, even if XPEV stock’s price is high, it’s evident that the bulls are in the driver’s seat. With such robust growth in Xpeng’s vehicle deliveries, short-selling shares would be unwise. Taking a long position could also be hasty, however.
In my opinion, the best strategy is to wait for the price tag to come down. Then you can consider taking a moderately sized position in this nascent EV all-star.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.